Greetings,
1. We begin with the Eurozone, where German inflation unexpectedly slowed in August. This is a setback for the ECB.
2. On the other hand, Spain's deflation may be easing. Perhaps.
3. Spain's industrial confidence is now trending lower, with some suggesting that this is related to the Brexit vote.
4. Similarly, the overall Eurozone business climate sentiment turned lower.
Source: European Commission
5. Portugal's economic data has been mixed. The nation's industrial production fell further while retail sales jumped.
6. Greek business confidence is improving, though remains below the highs reached before the Syriza victory.
7. Italian 5y government bond auction yield hit record lows (approaching zero). Yes, people are lending to the Italian government for five years at near zero rates.
8. This chart shows ECB's QE-related securities holdings approaching €1.4 trillion. The metric excludes LTRO, MRO, etc.
Source: ECB
9. The final chart on the Eurozone is from Ifo showing banks starting to (slightly) tighten corporate credit in Germany. This indicator should be monitored closely for signs of tighter credit in the euro area.
Source: @CESifoGroup
1. Next, we go to the UK where market-based inflation expectations continue to rise.
2. UK mortgage approvals fell to an 18-month low (chart in thousands of units).
3. The Bank of England's bond-buying (QE) has pushed the 30y gilt yield to record lows (approaching 1%). This is a disaster for UK's pensions.
1. Turning to Japan, dollar-yen jumped above 103 on rate hike expectations in the US.
2. Dollar-yen risk reversals show those betting on the yen running for cover. The bias is now (slightly) toward a stronger dollar.
Source: Bloomberg Terminal; Function "USDJPY 1M 25DR VOL BVOL <Currency> <Go>"
3. A weakening yen (strengthening dollar) is providing tailwinds for Japanese equities.
4. The Bank of Japan continues to buy index ETFs, rapidly increasing its holdings as a proportion of the market cap.
Source: @FTMarkets
5. Longer-dated JGBs have been selling off.
6. Japan's unemployment rate hit the lowest level in decades as labor shortages persist.
7. Japan’s industrial output growth deteriorated in July on a year-over-year basis.
1. Now we go to emerging markets where oil analysts are trying to determine the size of China's strategic oil reserves.
Source: @markets
2. China's government bond yields have turned sharply higher this month.
3. Chile's manufacturing production came in below consensus while the nation's copper production is declining (with potentially more production cuts on the way).
4. Brazil's unemployment rate rose to 11.6%. It will be a difficult and uneven recovery.
5. The Mexican peso declined sharply, approaching 19 to the dollar again (in response to rate hike expectations in the US).
6. Turkish stock market post-coup rally peters out.
7. India's Sensex stock market index is up 22% since the end of February.
8. The South African rand remains under pressure.
9. The Ukrainian hryvnia has been selling off. With limited FX reserves, the central bank is in a tough spot.
Source: IMF
10. Venezuelans are getting serious about recalling Maduro.
Source: @WSJ
1. Back in the United States, the Conference Board US consumer sentiment index beats forecasts.
2. US home prices are still rising at twice the rate of wages. Many point to low mortgage rates making housing more affordable. Nonetheless, this divergence between wages and home prices is not sustainable in the long run - even with low mortgage rates.
3. The Dallas Fed's latest report shows Texas retail businesses struggling.
4. The US 3-month LIBOR continues to grind higher (more on this later).
5. The driver of many markets on Tuesday was the US dollar which is on the move again. Here is the Bloomberg US dollar index.
The sharp dollar rise (above) is a good segue into commodities.
1. The asset class came under pressure as can be seen in this Bloomberg Commodity Index.
2. Brent crude gave up 2% as data continues to point to elevated inventories (more on this tomorrow).
3. Precious metals took a beating. Here is gold and palladium.
4. The next chart shows massive losses for US corn and wheat over the past couple of years (9/2/14 = 100).
Source: Bloomberg Terminal; Function "HMS"
1. Finally, we look at the equity markets where we see a material correction for mining shares over the past month. Nonetheless, the sector is still up over 72% YTD.
Source: YCharts.com
2. US bank shares were up again on Tuesday on rising short-term rates.
Source: YCharts.com
3. The market has been punishing high vol shares (rewarding low vol).
Source: @SBarlow_ROB, UBS
4. Tech IPOs: going public vs. going private.
Source: @PitchBook
Turning to Food for Thought, we have 5 items today:
1. According to Vox.com, "older Americans are far more skeptical of new car technologies".
Source: @voxdotcom
2. The "internet of things" is coming.
Source: @wef
3. The number of insurers in the ACA marketplace by county.
Source: @WSJThinkTank, @KaiserFamFound (Drew Altman)
4. India's share of the global GDP over the centuries.
Source: @qz, @paul1kirby
5. US electricity production by source.
Source: Claude
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